Thus far, Schwarzenegger has proposed devastating spending cuts that would eliminate popular health care, welfare and college cash grant programs, cause up to 80 percent of state parks to close and result in the release of thousands of inmates from California prisons.

"We have a very challenging time ahead of us," Schwarzenegger told reporters Thursday afternoon at the Capitol while promoting a $56,000 electric Hummer.

The governor didn't detail how he would close the rest of the $3 billion deficit, but noted it will be through spending cuts, which he said is very difficult for him.

"There's not a minute of the day when I don't think about ... and see the faces of the kind of people that this will affect," he said before taking the Hummer for a quick test drive. Schwarzenegger spokesman Aaron McLear said trimming the pay of 235,000 state workers will be a significant part of the governor's $3 billion spending reduction proposal.

The state-worker pay reductions will require the Legislature's approval and will save the state about $885 million.

More than half of that would be used to reduce the deficit. The rest of the savings would help ease the state's looming cash shortage.

Without a budget fix, California is on pace to run out of cash by the end of July.

The state has seen an unprecedented cash shortage since the end of last year, resulting in delayed tax refunds and temporarily halting financing of thousands of public works projects.

State workers and their union representatives blasted the governor for continuing to cut state workers' pay. In February, the state forced its employees to take two days off a month without pay. The state also is in the process of eliminating 5,000 jobs.

And despite Schwarzenegger and the Legislature enacting a budget in February that would close an unprecedented $42 billion deficit, California continued to be in fiscal free-fall.

On May 14, five days before voters rejected Schwarzenegger's budget-related ballot measures, the governor said the state would face an additional $21.3 billion deficit, and offered a plan that included deep cuts in education, prisons and health and welfare programs.

The plan also included nearly $6 billion in borrowing from Wall Street, an idea that Schwarzenegger has abandoned and has replaced with deeper cuts, including outright elimination of health care programs for nearly 1 million poor children, a welfare program that helps nearly 500,000 single mothers find jobs and phasing out Cal Grants, a popular cash grant program for college students from low- to middle-income families.

Now, the deficit is even deeper, prompting the governor to propose today the new round of $3 billion in cuts.